The overall discount on the investment trust sector is at its widest for a decade if 3i and other ve...
The overall discount on the investment trust sector is at its widest for a decade if 3i and other venture capital trusts are stripped out.
Research by Williams de Broe estimates that after excluding VCTs, the average sector discount, on a market cap basis, would be 15% rather than 9%. The 3i trust makes up some 14% of the total market value of the sector and currently stands on a 69% premium to NAV.
The inclusion of 3i masks the fact that the discounts of international generalists have been widening out, according to Richard Green an investment trust analyst at Williams de Broe.
Foreign & Colonial is on a discount of 15.6% and Witan is on one of 14.7%.
He said: "Investor interest has been in tech, media and telecom stocks rather than investment trusts. At the margin where the level of discount is decided supply has exceeded demand."
Green believes the widening of discounts among international generalists is a buying opportunity and highlighted Martin Currie Portfolio, managed by Tom Walker. The £277m trust currently trades at a discount to NAV of 20.5%. Green said that the board of the trust has stated there will be an unlimited buyback strategy at NAV in June 2004. Even if the portfolio achieves zero growth in the next four years investors can expect 5% pa uplift.
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